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Decisions: Fred DeLuca – Founder of The Sandwich Chain, Subway

London, UK (06/02/2009)

LONDON (Management Today) The best and worst decisions of his very successful career.


... was deciding to operate franchises. I started the first shop in Connecticut in 1965, aged 17, with the goal of opening 32 stores in 10 years. After eight years we had only 16, and the further from our office, the worse they did.

Franchising came out of necessity. I'd seen McDonald's and KFC operating franchises and in our ninth year I got a buddy to buy one of my stores. We learnt franchising day-by-day, week-by-week.

When we got up to 150 stores, I started wondering what was possible. I did my own study, looking at McDonald's and other chains, and came up with a formula: the US has room for 8,000 stores. In 1982 I worked out a timeline: we could have 8,000 stores by 1994. We had 200 stores at the time.

Everyone thought I was nuts. But it created a vision and people began believing it. It had taken forever to build 200 stores, so to get to 5,000 we had to step it up. I didn't so much inspire the team as say: 'This is what you're going to do.' We now have more than 30,000 stores worldwide.


My single biggest mistake was the failure to adopt stock control systems. I didn't even know they existed. I remember travelling to the stores and being impressed by the amount of soda we were buying. The soft drinks truck would pull up and unload cases and cases of drinks.

One day, my car broke down and I decided to hitchhike. A kid picked me up, drove by my store and said it was a good place. I was very proud. He then explained how to get all the free soft drinks you wanted: 'You go in with a couple of friends, then when the guy turns his back to make the sandwich, you slip out with a case of soda.'

That's when I realised it's not about the amount you're buying, it's the amount you're selling. Pretty early, I'd realised I had to count the money, but it was five years before I realised I had to count the soft drink.

The first time I hired an accountant, he said the good news was that I'd done my first $1m year, but that I'd lost $93,000. I was incredulous. From then on I decided I needed a financial statement every week.

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